Natixis sees gold price falling to $4,100 by year-end, but three scenarios remain in play
Gold prices could remain under pressure through the end of the year as rising oil prices, persistent inflation and higher interest rates take their toll on the precious metal, but Natixis believes the outlook could diverge dramatically depending on how the conflict surrounding the Strait of Hormuz evolves.
In its latest gold report, Bernard Dahdah, Precious Metals Analyst at Natixis, laid out three scenarios for the precious metal, ranging from a drop to $3,500 an ounce in a bearish environment to a rally above $5,250 if inflation falls sharply enough to force the Federal Reserve to pivot.
The French bank’s latest comments represent a significant shift from late August, when Dahdah raised his year-end gold price target to $5,000 an ounce as concerns surrounding U.S. debt and instability in the bond market provided strong support for the precious metal. At the time, he said concerns about fiscal sustainability and currency debasement were helping gold overcome elevated opportunity costs.
However, the macroeconomic environment has changed sharply in the last month, with Natixis noting that gold has once again developed a negative correlation with oil prices. Higher crude prices are increasing inflation concerns, which in turn are driving expectations that the Federal Reserve will have to raise interest rates further, increasing the opportunity cost of holding non-yielding gold.
Dadah explained that the relationship first emerged at the start of the U.S./Israel-Iran conflict before breaking down following diplomatic breakthroughs in June. The dynamic re-emerged in late August and has strengthened amid renewed geopolitical tensions and the U.S. rejection of Iran's latest proposal following the United Nations General Assembly.
At the same time, the bank noted that gold investors have become particularly sensitive to changing expectations surrounding Federal Reserve monetary policy. The charts in the report show gold weakening as expectations for another rate hike have increased.
Higher bond yields and a stronger U.S. dollar are adding to those pressures. Natixis said the correlation between gold and the U.S. 10-year Treasury yield has re-emerged since late August, while the most stable relationship this year has been between gold and the U.S. Dollar Index.
Despite the selloff, there are signs that investors continue to see value in the precious metal. Natixis noted that holdings in physically backed gold exchange-traded funds have continued to rise even as prices have fallen — a historically rare divergence.
“Some investors are buying the dip (ETFs), but structural demand is unable to offset the rates-driven repricing,” Dahdah said in the report.
Central bank demand could also change the trajectory. Natixis noted that strong official-sector purchases previously allowed gold to rally even in an environment of elevated bond yields.
However, the bank said persistently high oil prices and a strong U.S. dollar could force central banks to prioritize fighting inflation and supporting their currencies rather than accumulating more gold.
Against that backdrop, Natixis sees three potential paths for gold.
In its base-case scenario, the bank expects gold to remain under pressure through the rest of 2026 as the Federal Reserve considers another interest rate hike in December. Under this scenario, gold would fall toward $4,100 an ounce by year-end.
The bank assumes the Federal Reserve will hold interest rates steady in 2027, while continued de-dollarization, renewed investor demand and central bank purchases eventually lift gold to around $4,750 an ounce by the end of next year.
In his bear case scenario, Dahdah said that he sees a more challenging environment for gold. He said that any escalation in the Middle East conflict that shuts down the Strait of Hormuz would send oil prices even higher, keeping inflation stubbornly elevated and forcing interest rates to remain higher for longer.
The pressure could become even more acute if central banks shift from buyers to net sellers of gold as some countries liquidate reserves to defend their currencies. Under that combination of higher oil prices, persistent inflation, restrictive monetary policy and official-sector selling, Natixis sees gold potentially falling as low as $3,500 an ounce.
Finally, Dahdah said that if conditions in the Strait of Hormuz normalize, oil prices would collapse, accelerating disinflation and giving the Federal Reserve room to pivot away from its tightening stance.
In that environment, the bank sees gold prices settling above $5,250 an ounce.
